How Worrisome is a Negative Saving Rate?

Abstract

The U.S. personal saving rate's negative turn in 2005 has raised concerns that Americans may have to curtail their spending and accept a lower standard of living as they pay off rising debts. However, a closer look at saving trends suggests that the risks to household well-being are overstated. The surge in energy costs may have temporarily dampened saving, while the accounting of household income from stock holdings may be skewing saving estimates. Moreover, broad measures of saving have remained positive, and household wealth is on the rise.

Keywords: saving, consumption, wealth

JEL Classification: E21, E2